Treasurers of All-Volunteer Organizations: Eight Key Responsibilities

More than half of the nonprofits in the United States are estimated to be all-volunteer organizations. Here is a wonderful, succinct guide for the 600,000 + treasurers of such organizations:

My time as treasurer of a faith-based nonprofit was a labor of love. Starting out as an all-volunteer organization with a $20,000 budget, we developed financial systems, workable budgets, and demonstrated accountability. We served families affected by incarceration and there's no greater personal reward than seeing people realize they have real hope for a better life. In just three years the budget grew to over $330,000.

However, there was stress as well. As a CPA I found myself the recipient of unnerving deference at times. I frequently fell short in communicating financial information to board and staff. But the outcomes made it all worthwhile.

This experience helps me appreciate one of the many unsung heroes of our time: the treasurer of the all-volunteer organization (AVO). AVOs are among the most important and most invisible building blocks of our communities. Members of all-volunteer organizations read to children, care for the dying, get clean water legislation passed, serve as volunteer fire departments, help people overcome alcoholism, bring music into prisons, and help refugees get settled.

To do this and so much other important work, all-volunteer organizations raise and use substantial funds. And each organization has at least one volunteer leader counting the cash, writing checks, safeguarding financial integrity, and managing funds soundly. This guide is for you, Super Treasurer!

What do we mean by "all-volunteer organization (AVO)"? While AVOs range from small, relatively informal nonprofits to larger, more formal, affiliated organizations, in AVOs volunteers do most or all of the work. Following are some common attributes of AVOs:

Most AVOs are managed by a board of directors or a core group, of which one member is a "hands on" Treasurer who writes checks, makes deposits, and provides financial reports to the board.

Most AVOs don't have employees, although they may pay people for some non-managerial work such as refereeing at a youth soccer league, square dance calling at a dance club, or handling the distribution of books for a poetry society. These people are typically classified as independent contractors rather than employees.

Although some AVOs have permanent locations (such as in the back room of a historical home or at the library for a Friends of the Library), many do not, and meetings and documents move from home to home as officers change.

Because most AVOs have an informal air about them, it's easy for finances to be treated in a casual way. But when money matters are treated casually, it can become too easy for money to get lost, or for some people to question how money has been spent, or even for individuals to take advantage of the informality and pilfer cash or other assets.

So as an AVO treasurer, what accountability and transparency issues should you be most concerned with?

1. Handle the money with high standards and set a tone of integrity.

In an AVO, close treasurer oversight of cash, checks, and deposits is vital. If you can't always be present when money is changing hands, be visible enough that others know that you're engaged. Be especially scrupulous about keeping personal funds (yours and others') completely separate from organizational funds.

Given the limited personnel resources in most AVOs, it may not be possible to divide up financial duties as part of an internal control system, particularly since you can't always exert the same degree of control with volunteers as paid staff. However, a few essential rules should be followed:

The Treasurer should receive and reconcile the bank statements, OR write checks, but not both.

Outgoing checks must be supported by an approved invoice, receipt, or a voucher prepared by the volunteer if a receipt or invoice isn't available. If a fellow volunteer asks for a reimbursement but doesn't have a receipt, respond "I wouldn't be doing my job as Treasurer if I didn't insist on receipts from everyone."

Checks should require two signatures and never be signed in advance. Alternatively, the board might set a policy that permits one signature for small checks below a certain amount, say $50, in order to help discourage checks from being signed in advance.

2. Manage the filings

Keep a calendar of filing requirements and assign responsibility. Late fees and penalties can be very costly and diminish stakeholder confidence.

File Form 990 - Except for churches and certain religious organizations, all nonprofits must file an IRS Form 990 annually. For fiscal years beginning in 2010, organizations with income less than $50,000 ($25,000 for 2009) need only file the online "e-Postcard," Form 990-N.

File Form 1099 - Obtain an IRS Form W-9 from those providing paid services who are not your employees.

File Form 1099-MISC to report payments totaling more than $600 per calendar year to such persons. Forms and related instructions are available at the IRS website. Otherwise, if the individual is an employee be sure to contact an accountant or other person experienced in employment matters and take all steps required for a new hire. See "Downsizing from Employees to Independent Contractors?" for more on these issues.

Register with charitable solicitation agencies - Register, when required, with the charitable solicitation office in your home state as well as any state in which you regularly fundraise, including by email. Go to the Unified Registration Statement (URS) website for a summary of state by state requirements to determine if you must register as a charity, provide a copy of IRS Form 990, have a CPA audit or review, and whether the state accepts the streamlined URS application.

Obtain permits and Licenses - Check on regulatory requirements before undertaking activities such as serving liquor at a special event, conducting a raffle, or starting a bingo night. Such laws vary from state to state. It may be helpful as a starting point to talk to another nonprofit leader whose organization is engaged in the same activity. Most state nonprofit associations have helplines or publish FAQs and other guides covering these types of issues. If you're uncomfortable asking for help, get over it quickly!

3. Identify and manage risk

Take the lead in safeguarding your organization's assets, data, and personal information. Risks associated with volunteer screening, vehicle use, and special events are often of particular concern to AVOs. The Nonprofit Insurance Alliance Group and the Nonprofit Risk Management Center provide free introductory articles on ways to manage these and other risks.

4. Confirm contributions

A prompt thank you letter that includes what donors need for tax purposes is an effective way to keep your contributors up to date on the great work you're doing. The IRS says it's okay to send this information by email. When different financial duties are assigned to a variety of people, the chances increase that any misappropriated donations will be detected more readily.

Here's a sample of the essential information to include in your thank you letter:

"Date

"Name and address of nonprofit
"Donor name and address

"We wish to thank you for your 2010 contribution of cash in the amount of $500.00. We did not provide any goods or services in exchange for this contribution. XYZ Nonprofit is an organization exempt under Section 501(c)(3) of the Internal Revenue Code and contributions are deductible to the extent allowed by law."

Remember to separately list any single contribution of $250 or more. If the donation is other than cash, describe the property but do not indicate a value.

If you provided the donor with goods or services as part of the contribution, you could delete the second sentence in the above example and substitute the following:

"We provided you with two theater tickets with a fair market value of $50. Your tax deduction is limited to the amount of cash and value of any property contributed, reduced by the value of any goods or services received in return. Accordingly, the amount eligible for a federal income tax deduction is $450."

There are exceptions for items of minimal value such as pens and mugs. See the discussion regarding "quid pro quo" donations in IRS Publication 1771.

5. Track volunteer time

In many AVOs volunteer effort represents the majority of resource inflow. Tracking volunteers can help protect volunteers and the nonprofit from certain forms of liability and provide helpful data for planning future programs and events. And if you intend to seek grants you'll want to reflect the value of your volunteers in your budget and grant proposals. Otherwise, your board and other stakeholders may not know if you have the people in place to get the job done well. See "Tracking Volunteers to Boost Your Bottom Line" for more information along with sample volunteer tracking forms.

6. Plan and evaluate with a budget

Expressed in financial terms, a budget is a map that shows what you plan to do and how you plan to get there. It's a key tool for getting everyone to agree on what your group will and won't do in the coming year. And in informal AVOs where internal controls are often lacking, the budget is your canary in the coal mine. An unexplained variance between a budgeted and actual line item of revenue or expense, for example, may be the first red flag signaling a more serious problem.

Preparing an effective budget starts with asking leaders to estimate what they'll need and to provide specific proposals for financing it. Reviewing last year's budget is a key part of the process. Cost and revenue estimates need to be reasonable and attainable. Avoid the temptation to 'wing' estimates or to be overly optimistic about contribution increases. At the same time, don't act like a watchdog at the gate of the treasury, opposing all new funding proposals with knee-jerk resistance.

7. Prepare timely financial reports

Timely and reliable financial information is the underpinning of good stewardship and sound financial decision making. Without this information there's no way to track budget performance.

For AVOs with minimal cash flow or whose finances revolve around a single event, paper-based record keeping may be acceptable. A template treasurer's report with blanks for handwritten amounts can be just as effective as a computer-based system if the figures can be easily traced to supporting documents and are presented clearly. For such organizations, a simple monthly reconciliation of bank account activity classifying receipts and disbursements and reconciling beginning to ending cash balances may be enough to form the basis for a summarized quarterly financial report to the board.

As the organization grows, a switch to commercial accounting software such as QuickBooks(r) may be the best next step. It is vital at this juncture that you get set up with a proper chart of accounts and get the necessary training from someone with nonprofit accounting experience.

8. Recruit the next treasurer

Like other volunteers, the treasurer will not serve indefinitely. Unfortunately, some AVO treasurers entrench themselves and resist transfer of control. Throughout their term of service, effective treasurers encourage and equip fellow volunteers to participate in financial management duties. When it's time for the treasurer to pass the baton, these AVOs will enjoy the least disruption.

Indeed, all board members share equal responsibility for the financial health of your organization. Officer titles vary, but those typically described as President, Vice President, and Secretary form a core board leadership group alongside the Treasurer. The Secretary should be diligent in taking complete and concise minutes that reflect filing of the treasurer's report and all board decisions.

All-volunteer organizations constitute a huge economic and social force, helping communities of all types work better. As a front-line volunteer, the AVO treasurer plays a critical role in sustaining the organization, maintaining essential stakeholder confidence and supporting overall mission effectiveness.

Dennis Walsh,a certified public accountant who lives in Jamestown, NorthCarolina, is the author of Legal and Tax Issues for North Carolina Nonprofits. Through the Deborah and Dennis Walsh Foundation, he provides volunteer technical assistance to help empower community nonprofits. He can be reached at drwalsh at triad.rr.com

Comments (47)

Jan Masaoka

My Dad was the treasurer of his square dancing club, and I was the PTA treasurer of my children's elementary school. We would both have done better jobs if we had read this article. Thank you, Dennis. Jan

Very useful -- thank you. One question: Under item 1, "Money" you say that the AVO Treasurer should either reconcile the bank account or write the checks. So who signs the checks? We are a quite small (<$100K/yr) AVO; we have an I.C. bookkeeper and me, the Treasurer. I've tried recruiting another Board member to help, but unfortunately I don't trust any of the other Board members to take over any of these three responsibilities. (They refuse to balance the bank account, or to sign checks responsibly -- they don't look for, or at, receipts, know nothing about the Chart of Accounts so accept wildly wrong assignments, etc.)
Thanks.
Barbara West

Barbara, If I understand you correctly what I would say is that you need to sign the checks as treasurer and the bookkeeper reconcile the bank accounts. The lack of board interest in financial oversight is certainly a matter of great concern, but the specific accounting related issues mentioned need to be the primary responsibility of the bookkeeper under the treasurer’s direction. Jan Masaoka’s article “Who’s Responsible for the Board’s Doing Its Job/” in this same issue rings applicable here also.

Dennis -- Thank you very much for your reply. I'm pleased that what you've suggested is the one we have arrived at. I'll certainly check out Jan Masaoka's article. Building greater concern for financial oversight is certainly one of the challenges for our Board.
Barbara

I have a quick question....The treasure on our Board of Directors is a local business owner. Since he has become Treasure of our Board, he has closed his business and has filed for bankruptcy. Is this a conflict?

I think the treasurer along with the executive committee or other core board leadership should be able to assess whether the facts, circumstances and perceived reaction by stakeholders and the public might create any crisis of confidence in financial stewardship and the treasurer’s ability to continue serving. The fact that the treasurer has filed a bankruptcy, by itself, should not preclude him from continuing to serve, assuming that there have been no transactions between the treasurer and organization that may need to be reviewed in light of this development. Of course, there are an unlimited number of potential reasons for filing a business bankruptcy action, many of which may have been well beyond the control of the owner. However, if there are any unanswered questions of a more legal nature it might be wise to seek the opinion of legal counsel regarding state law issues.

How does a no-profit (not a registered non-profit, a no-profit) association that accepts donations that are used to provide refreshments at meetings (and perhaps little additional items like bins to collect business cards for door prizes provided by other sponsors) manage to open a bank account (e.g., non-interest bearing checking account with debit card) in a manner that it is set up specifically for this purpose and should not be in any way counted as income for any particular individual (no tax id for this no-profit association).

We are talking about anywhere from a few hundred to perhaps (if fortunate) a few thousand dollars to cover 9 general meetings a year that are free to attend and attract anywhere from 30 - 70 attendees at any given event.

This is a business targeted association and the sponsors are companies providing these funds in return for acknowledgements and some advertising at our meetings, in our meeting notices, and our website and such.
I am assuming that the answers will apply no matter which state the association is in.

You didn't say what the mission of your organization is, so I don't know whether you would be eligible for 501(c)(3) status. However a 501(c)(6) designation is for 'business leagues, Chambers of Commerce,' which sounds like your 'business-targeted association.' You might investigate that, and other IRS tax-exempt categories. In any event you will have to have an EIN to get a bank to open an account which is not tied to an individual.
Good luck!
Barbara West

Recently joined an AVO, an ethnic club which like any org has some history of mismanagement of resources. I asked at my first meeting as a member why the treasurer didn't hand out copies of their report for the attending members to follow instead listening to the treasurer read off a long list of items of income and expenditures. The answer was 'we don't do that' and of course I asked why not and the past president stood up to say that "Robert's Rules don't require it". Of course I commented that that was not a good reason but had no positive result out of bringing up a point. What are your comments/experience because in trying to read "Robert's" from the web I didn't see an answer one way or the other?

When does a small non-profit organization need to apply for exempt status?
The organization I have in mind has existed for years, but has not obtained exempt status through the IRS. It operates as a social welfare-type org--if it did apply, I think it would be a 501(c)4.
It has a taxpayer ID number that was used to set up the bank account.
There is limited gross income, but a person is paid to manage the org., currently as an independent contractor.
No 990-N filings have been made, as they do not have non-profit status with the IRS.
Is it possible to do 990-N filings for entities such as this?

Ummm. I'm not a lawyer nor CPA, but my impression is that an organization of any size or purpose needs to apply for 501(c) status as soon as it wants to / needs to assure its donors that contributions are tax-deductible (to the extent allowed by the law ... with all the usual caveats). While any tax-deductible contributions must be spent towards the social-goods ends you have declared in your tax-exempt application, only secondarily do the nature of your expenses have anything to do with your exempt status in the eyes of the IRS. Your I.C. manager may be a very effective way to accomplish your goals, but unless your social goals are registered with and approved by the IRS, you aren't an exempt organization so you can't offer tax-deductible status to contributors.
If the deductibilty doesn't matter to your donors then you don't need to worry about what the IRS thinks.
The existence of a TIN, separate from any individual's EIN, doesn't give you tax exempt status. Realistically tiny organizations can stay under the IRS's radar for years, but should you, by the ill-luck of the draw, come onto their screen, good intentions and good actions for decades will only give you the (painful) opportunity to accumulate the data to demonstrate that you have acted in good faith as an exempt organization without benefit of the formal status.
Without a formal IRS acknowledgment of exempt status, I doubt that you would be able to file a 990 at any level.
Good luck with however you choose to thread this needle.

P.S. To apply for exempt status go to irs.gov, click on the 'Charities & Non-Profits' button, then Charitable Orgs. The site is set up to walk you through the 501(c)3 process; use the Search box to get 501(c)4 info.

In our organization the treasurer makes lump sum deposits with no tracking of where the monies came from - can you guide me to an article that outlines internal cash handling procedures. We are a sports league that has a budget of about 90k and we collect money from multiple fundraisers / sponsors / and fees paid by parents. How important in the bigger picture is it to track where the monies come from.
Thank you

who should be responsible for getting the tax I.D..emi number..a volunteer treasurer, or the president head of the club,..?I just volunteered as treasurer and the president put my s.s number and add..to obtain.the ID...without my consent..i shall be sending a letter to the IRS..to delete, however I dont know if this was improper..or how it should be?

I hope someone who is really expert on this answers your post as well. You are absolutely right that you don't want your s.s. number on the nonprofit's bank accounts, or any accounts, for that matter. (The IRS will believe that any income is for you personally.) Anyone can apply for an EIN (Employer Identification Number -- tax I.D.). It might as well be you who applies for it, because you are most likely to know the information they want, and if you don't it's a good way to learn it. You can apply online: www.irs.gov, in the Search box type EIN and it pops up with information and you can click on the link to actually apply. It sounds like your organization really needs you. Good luck! Barbara West

A response to the above questions from article author Dennis Walsh, CPA

Generally, a person legally authorized to represent the organization should apply for the EIN (e.g. officer, incorporator, director, principal, founder). The IRS does require the name and Social Security number from the individual applicant, but this is for security and verification purposes and will not be publicly available. If a third-party is applying on behalf of the organization, such as an attorney or accountant, there are special rules for granting authority to such a person to apply for the EIN which are set forth in the Form SS-4 instructions.

Unfortunately, I see so many examples of non-profits thinking they are saving money by using volunteers in positions that require expertise and experience that the volunteers don't have. It ends up costing the organization more money in the long run and the integrity and accuracy of the records and reporting aren't being made a priority like they should be. I suggest hiring a qualified and experienced Controller/CFO to perform these functions on a part-time basis and using volunteers for activities that don't require that level of accountability and expertise.

I just joined the board of a non-profit organization and noticed that the treasurer is doing bookkeeping as well. I informed the Board Chair that he shouldn't be doing that because the Treasurer is an oversight position of the accounting department. She then asked, show me where in GAAP, or a specific regulation/law that states that the Treasurer cannot do bookkeeping. I mentioned that the Segregated Duties of the Treasurer does not allow that, but she mentioned to me again, show me where in GAAP, regulation / law that specifically states that.
Does anyone have any leads as to where i can get that information so I may print it out and show it to her?

It is not unusual, particularly in small organizations, for a board treasurer to participate in accounting fumctions. The internal control principle involving segregation of duties seeks to assure that there is adequate separation of functions involving bookkeeping, custody of assets, authorization of transactions and independent reconciliation. If a treasurer is performing accounting functions, then the corporate duty of care would neccessitate that other board members are actively engaged in the monitoring and oversight of such duties performed by the treasurer, as the board would oversee management staff performing similar functions. One should expect in the situtation, for example, that the treasurer would not have the authority to sign checks, make independent financial decisions and that a board committeem or the full board, reviews bank account reconciliations, financial statements and budget comparisons.

I am involved in a nonprofit organization. There's a nationwide office with a P, VP, T and S. Then there are areas of the united states that are broken down into regions. Each region has a P, VP, T and S. Each region then has individual areas controlled by a P, VP, T and S. I am one of the individual area's presidents. We are ALL volunteers. We got a new president of the regional organization starting in January and she just fired the 4+ year treasurer. Are we individual area presidents entitled to know the reason? And as the office needs to be filled, the president is giving us one choice for the replacement to vote on immediately. Should we ask for qualifications? I don't want to overstep my involvement but I do believe in due diligence.

I am currently holding the title of Treasurer in a non-profit organization. We have approximately 12 members and strive solely from donations & fundraisers. I have been making deposits, writing checks and tracking all financial transactions until here recent. Our Board has recently made some changes which was told that I will no longer handle any money / deposits, but I would take care of any check writing and bookkeeping obligations. Is this correct procedure for an organization this small ( less than $10,000) ?

Can you please tell me what the legal effects would be for me having my name as a Treasurer for my sister in laws non profit group when I have no idea what It intails or any of the financial knowledge? I have helped her very little with her group so I am unaware how any of this works... Please advise me

Hi Dennis---thanks for the good information. Do you have any information on how "Sarbanes-Oxely" has been interpreted/applied at the state level? I am Treasurer of a $2 million revenue NFP in California (United Serebral Palsy). I also understand that California rquires each NFP to have a CFO wherein the Treasurer can serve as the CFO. We have a paid Director of Finance and one other accounting staff. Lee Cross LCAservesu@gmail.com

Dennis,
I've just joined CompassPoint Nonprofit Services. I am on the Board of a 501 (c ) (3) non-profit corporation. I saw your name on this article in the Board Cafe about treasurers of nonprofits. Our nonprofit counseling center is looking for the right person to be our treasurer. We already employ an accountant and a billing agency to handle our financial transactions. We need a treasurer on the Board who will interpret the financial data for our Board and help set goals for the organization to keep us afloat and able to do what we want financially.
We would appreciate some advice on how to go about finding a treasurer.
Thank you for any pointers that might be helpful.
Barbara Meyers

I am on the board of a 501(c) (3) organization with assets of about $250,000, over half of which is invested in the stock market in a special fund. Until now we have had very detailed treasurer's reports as well as special reports on our special fund which I found very helpful in understanding our financial situation. We now have a new treasurer who supplies us with very little information at our monthly board meetings, saying that it is not necessary because "they are always the same". I find this very disconcerting to say the least, but the rest of the board accepts it as they know little about finances. The president also accepts it in spite of my objections and warnings.
What can I do to make them understand that the treasurer needs to keep us informed monthly of what is going on? I founded this well respected, educational organization with about 400 members 25 years ago, and I am really worried about what is happening. I think the treasurer is capable of giving us far more than he is supplying us with, but he is getting away with doing much less. Everyone but me has no objections to his behavior.
Please give me your thoughts about what I might do to get him on the right track
Anonymous

Get an outside audit or financial review, ASAP!!! These are huge red flags. If your board doesn't understand, then try talking to them individually. Also, get training for your board members with respect to their fiduciary responsibilities. This situation could end very badly....

I am the treasurer of a 48 unit condo association. I have over 40 years of working in finance. The president of the association keeps insisting that she have the accounting program on her personal computer at home. This is not a read only request. I have told her that I will produce any reports she wants and she can sit down at my computer, with me present, to look at anything. We are all volunteers and I do this to keep busy in my retirement. I feel that she is crossing the line by asking this. Does anyone have any guidance on how to handle this? All comments will be appreciated..

Greetings,
I am the current President of a small NPO/ 501(c)(3). We've recently changed treasures, in addition the organization has accrued a substantial amount of money. Prior to me being President, there was little criteria for being a board member, President, Treasurer.
Since there is a growing balance, I brought it up at a meeting that in addition to the insurance for the BOD, that bonding the Treasurer, VP, and President (who sign checks) would be in the best interest of the organization.
Doing a simple background check was proposed by the board, and passed. This was done with the intention of being able to get the aforementioned positions bonded through our insurer.
Is there a legal problem with asking people who serve on the board, to have a basic background check, in order to get them bonded? This policy was created by the board (and passed) however the new treasurer will not "allow" us do a basic background check.
This raised a red flag for me ( and other board members).
Thanks for any related information/links/contacts that may help out in this situation.

I'm not aware of any legal restrictions on performing criminal background checks on volunteer board members, so long as they comply with the FCRA requirements and any applicable state laws. Since they are volunteers, the nonprofit can ask them to comply with pretty much any reasonable administrative hurdle. I'm not surprised that someone has balked at the process, though. In a world where personal data is increasingly fragile and monetized, it seems reasonable to be concerned about releasing the type of information that is necessary for a background check. My suggestion is that you try to address the Treasurer's concerns rather than try to force the issue. The results of a background check can become fodder for gossip if not handled carefully. It sounds like your organization would benefit from a written policy and practice of limiting the dissemination of the results. Here's a link to an article that might be helpful--https://charitychannel.com/background-checks-for-board-members-paranoid-or-prudent/

I am new to a small town mountain community which has a water board. Anyway our property taxes are scheduled for a 66% increase, while other nearby communities are 3% increase. I believe due to this previous scandal of fraud with the water district. My question is should the current treasurer show bank statements at meetings? A recent article eludes to the current treasurer not doing this.
Best Regards.

I have been involved with a professional non-profit organization for several years. I am currently on the Finance committee. Recently there has been conflict between the Executive Director and Treasurer. There seems to be a departure from the way the board used to function with the Execute Director wanting to have an expanded role in financial matters. What is the role of the President vs. Treasurer vs. Executive Director? There appears to be overlap to some degree in their responsibilities. What is the best practice to have a functional organization?

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